IN AN UPBEAT interim management statement this morning, Allied Irish Bank (AIB) claimed “substantial progress” has been made in the second half of 2012 in restructuring the institution.
It said its revised strategy and cost efficiency initiatives, including voluntary redundancies, will ensure a €0.4 billion reduction in the bank’s operating cost base by 2014.
Although it admitted its core business environment remains challenging, AIB said there is “continued evidence of stabilisation”.
“Bad debt provisions for 2012 will materially reduce from elevated levels in 2011,” the bank said. “Arrears in our Irish mortgage and SME portfolios have increased, however the pace of increase in criticised loans is slowing.”
According to the statement, more than 1,000 staff have left the bank under the Voluntary Severance Programme and an early retirement scheme in the past year. Another 1,700 will have departed by the end of next month. The minimum target of 2,500 staff reduction will be achieved within the next two years, said the bank.
Over the past 10 months, 45 sub-offices have closed and six branches amalgamated because of cost base restructuring. A further 16 branches will be shut across Ireland next year with additional services offered through An Post in their place.
Despite the outflow of €1.4 billion seen after the closure of AIB’s operations in the Isle of Man and Channel Islands, customer accounts continue to increase.
Mortgage arrears and SME activity
AIB has accelerated the rate of engagement with mortgage customers in difficulty and is now providing forbearance and restructuring options to customers to ensure sustainable repayment schedules. Of those with revised terms, about 70 per cent are adhering to the new conditions.
The outlook for 2013 and beyond will be influenced by the domestic and international economic environment, however, we expect bad debt provisions to continue to trend lower year on year and to return to more normalised levels over time.
The loan to deposit ratio has reduced from 125 per cent at the end of June to 120 per cent in October.
AIB noted that it is ahead of its SME lending and mortgage lending targets for the year so far. It has sanctioned 23,040 credit facilities to SME customers to the value of €3. 4 billion. About €1.1 billion has been loaned to 5,922 mortgage customers.
However, it added: “…new customer lending demand remains muted in the current challenging economic environment and therefore overall credit growth is limited.”